@2010Concept of ScarcityIntroductionScarcity is a situation in which there are not enough goods and services to satisfy the existing demand. It occurs when the amount of goods demanded is more than the amount supplied. This phenomenon brings about the element of choice which results in opportunity cost. Opportunity cost is the value of the goods or services that is for gone. The concept of scarcity is a very vital part of economics as a discipline. This is because economics as a discipline revolves around the use of scarce resources in the production and distribution of valuable commodities (Ernest and Bulent, 1996).
It is however noted that the form of scarcity on which economics is based on is relative and not absolute scarcity. Absolute scarcity is a situation in which there are not any goods and services to go round. This can be analogized by what happens in drought stricken third world countries in which case there is not any food available. On the other hand relative scarcity states that “goods are scarce because there are not enough resources to produce all goods that people want to consume” (Samuelson and Nordhaus, 1989).
It is thought that scarcity exists “simply because it is human nature for people to want more than they have” (Ruffin and Gregory, 1993). ScarcitySince human beings are insatiable the concept of scarcity advocates for the rationing of goods and services in a given way. This is done to ensure that there is some form of balance in the demand and supply of goods and services. The system that is most commonly made use of is the price system. In the price system; a price is put on a good or service which necessitates an individual to choose which goods or service he/she will use his/her respective income on.
For instance the subscription to DStv services is far more expensive than the subscription to local channels in Kenya. This makes people who have little money to spend on luxury unable to subscribe for DStv. This has further led to a big divide between the rich and the poor in terms of what kind of goods and services is available to them. However, there are goods which are not scarce for instance air and water.
These goods are readily available. Some versions of the goods; that are ‘clean’ air and ‘drinkable’ water are not readily available. People therefore pay for these resources. Scarcity helps us understand that resources are limited and we cannot satisfy all of our wants. It also makes us devise ways to make use of the available resources in the most prudent and economical way. This brings about the concept of choice which implies some form of cost hence the term opportunity cost. Opportunity CostOpportunity cost is the worth of the alternative that is relinquished.
For instance going for dinner instead of the movies or studying for exams versus going for a family’s get together or buying lentils instead of buying meat, taking up a job instead of going to college. From the aforementioned examples it is observed that taking one option means sacrificing the other option. The opportunity cost of dinner is the movies given up; that for studying is the family’s get together given up, that for lentils is meat and that for taking up a job is going to college.
All these examples show that the choice of one item over another results in a person for going something that has value which implies some sort of cost (Raiklin, 2000).